Good morning, and welcome to ADM Fourth Quarter 2024 Earnings Conference Call. All lines have been placed on a listen-only mode to prevent any background noise. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Megan Britt, Vice President, Investor Relations for ADM. Ms. Britt, you may begin.

Welcome to the fourth quarter earnings conference call for ADM. Our prepared remarks today will be led by Juan Luciano, Chair of the Board and Chief Executive Officer; and Monish Patolawala, our EVP and Chief Financial Officer. We have prepared presentation slides to supplement our remarks on the call today, which are posted on the Investor Relations section of the ADM website and through the link to our webcast. Some of our comments and materials may constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance, and financial results. These statements and materials are based on many assumptions and factors that are subject to numerous risks and uncertainties. ADM has provided additional information in its reports on filed with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation and the materials. Unless otherwise required by law, ADM assumes no obligation to update any forward-looking statements due to new information or future events. In addition, during today's call, we will refer to certain non-GAAP or adjusted financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available on our earnings press release and presentation slides, which can be found in the Investor Relations section of the ADM website. I'll now turn the call over to Juan.

Thank you, Megan. Hello, and welcome to all of who have joined the call. Please turn to slide four where we have captured our fourth quarter and full-year performance highlights. Today, ADM reported fourth quarter adjusted earnings per share of $1.14, and full-year adjusted earnings per share of $4.74, in line with the midpoint of our guidance for the full-year. Total segment operating profit was $1.1 billion for the fourth quarter and $4.2 billion for the full-year. Our trailing four-quarter adjusted ROIC was 8.3%. And cash flow from operations before working capital changes was $3.3 billion. Though 2024 presented a variety of challenges, our diligent focus on improving operation has made a positive impact across the network. We achieved strong crush volumes in canola and rapeseed, as well as our -- in our LATAM region. We made progress in addressing challenges in North America in soy assets, reducing unplanned downtime, and improving crush volumes in the month of December. We successfully ramped up run rates to meet demand at our Spiritwood facility over the course of 2024. We achieved a strong year in Starches & Sweeteners, where improved plant performance led to 3% higher production volume year-over-year, helping several product lines in our North America business set operating profit records. We made progress in addressing demand fulfillment challenges in EMEA flavors, while successfully integrating two new flavors acquisitions announced in early 2024. We improved our safety record significantly with a more than 35% year-over-year reduction in Tier 1 and 2 process safety incidents across our global network. In addition, we advanced key innovation initiatives in areas such as biosolutions and health & wellness, continuing to support growing customer demand in these parts of the business. And through this, we were able to maintain a strong balance sheet to ensure continued…

Thank you, Juan. Please turn to slide seven. Before jumping into segment performance, let me quickly recap some of the financial highlights for the fourth quarter and full-year 2024. While the fourth quarter played out largely as expected, we experienced negative pressure from market conditions later in December. For the full-year, we finished within our previously guided adjusted earnings per share range. The team remained focused on key self-help actions to finish the year and enter into 2025 on a stronger footing. Now, transitioning into highlights on segment performance and starting with AS&O. To start, let me provide some perspective on the broader market environment and the dynamics that shaped the fourth quarter. The operating landscape was challenging in the fourth quarter, with biofuel and trade policy uncertainty at the forefront. Ample global supplies, higher crush rates from Argentina, and uncertainty in biofuel and trade policy negatively impacted the crush environment. We also experienced high manufacturing costs. As a result, soybean and canola crush execution margins were approximately $10 per ton and $20 per ton lower respectively versus the prior period. Also included in the fourth quarter results for our crushing subsegment were $52 million of insurance proceeds related to the partial settlement of the Decatur East and Decatur West insurance claims. Increased pretreatment capacity at renewable diesel facilities as well as the continued elevated import levels of used cooking oil also weighed on both biodiesel and refining margins during the quarter. From a food oil perspective, we continue to experience softer demand from customers as they looked to cut costs. The origination environment was supportive in North America as the logistical challenges related to the U.S. river level eased compared to the prior year. Overall, against this backdrop, AS&O segment operating profit for the fourth quarter was $644 million,…

Thanks, Monish. I'll briefly close by recapping our focus as we continue the path into 2025. With the uncertainty we've noticed in the external environment, ADM is prioritizing an internal focus on the areas we can best control. While administering this self-help we'll remain agile and ready for opportunities that may present themselves along the way. Our focus on execution and cost management will drive savings to the bottom line while ensuring that we're managing our assets and overall network as effectively as possible. Our focus on strategic simplification will deliver opportunities to optimize our portfolio and organization around those areas that deliver strongest returns and where we are the strongest operators. Our focus on strategic growth will allow us to organically invest in proven winners while also ensuring our business are ready for the future. And our focus on capital discipline will position us to continue the return of cash to shareholders through dividends and selective share repurchases. We are confident that this equation sets ADM up for success in 2025 and ensures we have necessary optionality in both the short and medium term while keeping our eyes on longer term opportunities ahead. With that, we'll take your questions now. Operator, please open the line.

Thank you. [Operator Instructions] Our first question for today comes from Tom Palmer of Citi. Your line is now open. Please go ahead.

Good morning, and thanks for the question.

Good morning, Tom.

Just on the nutrition segment, I wanted to make sure I understood the expected profit recovery. It implies a pretty big inflection as the year progresses. You noted 1Q has some maybe heightened headwinds. It sounds like at least for the second quarter, I wasn't sure if it was second quarter or for the full-year, the start up at Decatur's noted as a headwind. And then, you've got the insurance headwind, especially in the second-half. So, just trying to understand what really drives that inflection. Is it the belief that end markets get better? Is this cost savings plan maybe more concentrated in this part of the business? Thanks.

Yes. Thank you, Tom, for the question. Listen, nutrition has a big self-help story inside themselves as we have in ADM of course. But I think the main issue for Nutrition is you need to think about like three different buckets. There is one bucket that is the Decaturist plant, which is Specialty Ingredients, that is a big headwind and until we can bring the plant back that will continue to be. So, that is going to happen in the first quarter. Hopefully the plant will be back in the second quarter we expect, and that will naturally bring an improvement to the results. The other bucket is a bucket that it continues to go very well, which is, if you think about flavors and if you think about biotics, those businesses are going very well. They are growing. They have grown 7% and 10% respectively in revenue in 2024. So that's going to continue and that's basically execution of their pipeline, and their pipeline is very robust and very good. And I would say, the third bucket is you have this steady improvement month-over-month, quarter-after-quarter of animal nutrition, which is not a revenue story, but it's a margin improvement story. So, you have three different things, and when you put them altogether, we see a strong recovery in the last-half of the year for nutrition.

Tom, just to add, and I know you already picked it up, but just for math, when you look at it sequentially, so you're right, Q1 starts softer. Sequentially, after adjusting for the insurance recovery, which we have $46 million, we expect those results to be pretty much in line, Q1 equals Q4. And as Juan mentioned, the manufacturing cost, all the self-help starts kicking in, in the second quarter to fourth quarter.

Understood. Thank you.

Thank you. Our next question comes from Andrew Strelzik of BMO. Your line is now open. Please go ahead.

Hey, good morning. Thanks for taking the question. I wanted to ask now that we've got the -- hey, how are you? I wanted to ask about your view on vegetable oil demand, soybean oil demand in particular. Now that we have the 45Z guidance kind of behind us to a certain extent and the imported UCO that's not going to qualify for tax credits. In kind of your first-half, back-half, a summary there slide, you gave what I would say is a reasonably constructive outlook for vegetable oil demanded. So I guess, I'm just curious for how you think about the puts and the takes around that because I know there's a lot of concern in the market. And then, kind of subsequent to that, as you think about all the uncertainty that's impacting the first quarter, is there a way to think about kind of the first-half, back half, earnings split relative to what is typical for you guys? Thanks.

Yes, thank you, Andrew. A lot to unpack there, so yes, we received guidance from 45Z in January and I think it was constructive, but it's still a lot is in the air. We still need to get finalized that guidance. Probably, it's not going to happen until the end of Q1 and by that time we might have sold already Q2. So we have to see how that evolves. So we have to be cautious with that. On the other hand, when you do the math that probably implies an extra maybe 0.5 million tons of oil demand by Yuko that's not going to qualify for this. Our team anticipates that soybean oil share will be up from 35% to 40% and maybe Yuko down from 20% to 14%. So, I think that this is a year in which right now the Ag Services and Oilseeds Industry is trying to digest this extra capacity, if you will, extra production because we have North America, we have Brazil and we have Argentina producing -- crushing a lot and also this big uncertainty not only on tariffs for imported products, but also the policy uncertainty around biofuels. We think that as these policy uncertainties start to clear through the year, we're going to see margins improving and you can see that in the current in the market for crush going forward. We are excited about the manufacturing improvements we're going to have and we are excited about the fundamental demand that when these clouds of uncertainty regulatory will clear, you will see that the livestock area is very strong and soybean meal continues to be the most beneficial feeding material, so that's maximizing the rations at the moment. So, USDA is thinking meal growth probably 5.5%, maybe we have even some upside to that number potentially. And then you have this area of all the mandates that are coming around the world. I think Monish referred before in his previous remark about SAF in Europe, but also it's Indonesia, also it's Brazil increasing their biofuels mandate. So and when we clear 45Z, we're going to have that extra demand from the U.S. So, we see a first-half, second-half different pattern than other years and very hard to quantify what else on one and the other, because it will depend more on government and clarifying the regulatory environment, which we can only adjust to, but we cannot manage.

Great. Thank you very much.

Thank you. Our next question comes from Ben Theurer of Barclays. Your line is now open. Please go ahead.

Perfect. Thank you very much and good morning. Just wanted to follow-up on your guidance cadence for Ag Service and Oilseeds, similar to what Tom had on Nutrition. But as we look at it, obviously, Q1 is very tough comp and you already indicated that to be 50% down. But then in order to get to just slightly below 25 levels as your guidance indicates, that would mean that 2Q onwards; we should see improving trends on a year-over-year basis. And I just would like to understand if you can help us reconcile that with lower insurance proceeds, but then at the same time you assume canola and soybean crush to be lower for the year? So, I just wanted to understand what is else in there that helps us to get those profits in line to below versus '24 with such a tough start in 1Q?

Yes, I think the -- then -- part of the tough start in the Q is because although you see some canola margins maybe rebounded recently, when we put our book, we put our book at lower numbers, because we put itthere in Q4. So, maybe our Q1 is even lower than maybe what current conditions may indicate. When we think about crush margins approximately around $40 in Q1, we are expecting full-year crush margins in the range of $45 to $55 per ton for soy. That's about $5 lower than the average of last year, and canola $50 to %70 that's probably 20 bucks lower than last year. And again, you have to include here all the improvements that we expected in manufacturing for the business. If you recall, last year we were doing a lot of project automation and digitization in the carb solutions area. And I mentioned before that we have run an experiment with the oil seed plant in Brazil. And now, we have the result of that experiment. And we are bringing some of those learning. So, we expect a lot of self-help coming to Ag services and oil seed. And we also expect destination marketing to grow our internal -- our direct farming procurements also to improve or to grow this year. So, -- and as I said, mill is going to be strong. And soybean oil should become significantly better in the second-half of the year so.

And Ben, I would add to Juan's comments. Just when you think about RPO or biofuels and what clarity that gets. That should allow the second-half to be far stronger than the first-half. And Juan already mentioned, when you look at the forward curve that carries is pretty strong in the second-half. And we are open for business quite a lot in the second-half. So, hopefully, we are positioned to take advantage--

To capture that, yes.

To capture as that goes, so, all that put together, why you start pretty soft in Q1. And then, you move yourself up. But you're right. It's a second-half story. And that's what we'll have to watch. Multiple factors -- as you're watching, we are watching the same. Whether it's weather whether it is the crop yields et cetera. So, as we know more, we'll keep you posted. But that's how we see it right now.

One of the things also, Ben, as I forgot is we don't have the negative takeoff pace that we had last year in Brazil. So, we don't expect them this year. So, that would be a positive also for this year.

Okay.

Thank you. Our next question comes from Heather Jones of Heather Jones Research. Your line is now open. Please go ahead.

Morning. Thanks for the question.

Good morning, Heather.

I wanted to ask I -- good morning. Just wanted to first of all clarify that your guidance doesn't include any expected impact from tariffs, and then secondly, even if it doesn't include it, if you could just flesh out how that would look for you guys? How you have to be thinking about the impact from operations, particularly in North America? Thanks.

a: The China retaliatory measures doesn't include agricultural products at this point in time. So, it's difficult to know. I think in the short term, our teams are making sure that they are doing everything possible to avoid the short-term impact. I think medium-term and long-term trade flows seem to stabilize. But of course, we saw in 2018 how the corn imports from China were reduced by almost like 9 million tons from the U.S. Whether that's going to be something that's going to happen again or not, we'll have to see. Again, when you think about the power of ADM in terms of our origination in so many parts of the world and our destination marketing in so many parts of the world, it provides an optionality that few companies have in order to be able to capitalize on any environment. We don't know if net-net it will be a positive or a negative, but we will go through as we went in 2018.

Thanks so much.

You're welcome.

Thank you. Our next question comes from Steven Haynes of Morgan Stanley. Your line is now open. Please go ahead.

Hey, good morning, and thank you for taking my question. I wanted to come back to Argentina and their recent export tax revision across the soy crush complex, and if you could just briefly, I guess, talk about how you think that's going to impact your businesses and then how maybe you see that policy evolving after turn because I think that's kind of when they had framed the current revision period for. So, thank you.

Yes, thank you for the question, Steven. So, let me -- this policy was implemented, as you said, effective until June 30. Very difficult what's going to happen after that, because it depends more on microeconomics of Argentina, so it will depend on many, many factors. I would say, until then, we haven't seen a big impact yet, mostly because they are still going through the harvest and through the planting. Second, because and I'm a farmer in Argentina, we're all worried about the weather in Argentina and the crop in certain places doesn't look terrific. We need rains that are expected to come, but those rains may just stabilize the yields but not being able to turn around that. And then, there are details about the implementation of this regulation that we need to be observing. Before all this, you needed to bring the dollars into Argentina 30 days after your shipment. Right now, if you want to qualify for this reduction in exports, you need to commit that you're going to bring the dollars of 95% of all the amount within 15 days of issuing the license. So, before you have 30 days from shipment, now you have to bring the money 15 days after you get the export license. So that's a big financing change in the thing that I don't know how it's going to impact. So we will have to see in April with the farmer's seeds on top of their harvest and they have from April to May to June to be able to play this how much it's going to be. At this point in time, we haven't felt much.

Thank you.

Welcome.

Our next question comes from Pooran Sharma of Stephens. Your line is now open. Please go ahead.

Great. Thanks for the question. I wanted to see if we could unpack 45Z guidance a little bit. I know there's been, the situation's fluid. Biden provided interim guidance, but I think there's a little bit left with final guidance. To my understanding, the biofuels industry with interim guidance is able to accrue tax credits, but I think you need final guidance to have them paid out. So we've seen some smaller operators already seize shutter production. We just weren't sure about the larger producers. So I wanted to kind of get your take on 45Z guidance and then the State of the Union on the biofuels industry.

Yes, let's see if I can provide some clarity to that. First of all, this is preliminary guidance and of course it needs to be ratified after the comment period and then we need to see what the Trump administration will decide on this. So this still needs to be played out. I would say with the removal the blenders tax credit, margins have been significantly impacted. And so, you may see some small producers that in the absence of all these, when they are not integrated and are isolated plants, they have shut down. We were expecting to do that. Our integrated facilities, all our facilities are integrated, have allowed us to continue to operate, although we see the impact in Q1 margins that we're going to have as we have Q4 margins. So the industry definitely needs to bring some margin back into it. More importantly, we need to bring clarity because lack of clarity has pulled people off the market. What we know is the administration of President Trump strongly supports the farmers and having an output for the farmers' production. And I think that in that sense, a strong biofuel policy, a strong export policy, a strong bio-solutions type of product are all going to be very supportive.

Great. I appreciate the color.

Thank you.

Thank you. Our next question comes from Manav Gupta of UBS. The line is now open. Please go ahead.

Good morning. I'm sorry I dropped off briefly. So if somebody has already asked this, I apologize. But Monish, your key priorities when you took over, your focus was one on operational rigor and second, ensuring there are no material weakness in financial reporting, and what's the progress been on those two fronts? Thank you.

Yes, thank you, Manav. I would say on both, and I'll start with the material weakness. As I said at the end of my prepared remarks, that is one item that we are very heavily focused on, which I am focused on. And the progress on that, and I'll start by just saying, when we talked to you three call, and you had asked the question, I said the company had enhanced the design and controls and documentation of inter-segment sales. So we have continued to do that this quarter. We have continued to provide a lot of training to our personnel around the reporting and recognition of inter-segment sales. We have enhanced and tested a lot of controls, and we need to continue to make sure that is sustained for a period of time before we can lift the material weakness. And that's what the teams are focused on. We also made an announcement where we've got Carrie Nichol who's joining us, the Chief Accounting Officer, who was from a similar role in Cargill. And I'm excited to have her on board and my partner to help me continue this journey that we have started on remediating our material weakness. To answer your question on operating rigor, you can see that we've made progress. In Juan's comments, you can hear that some of the items where we have done root cause in our manufacturing facilities have given yielded results. In December, we saw good outputs in some of our plants in North America. We also saw progress in EMEA, in our flavors business, in nutrition. And as a part of that whole thing, Manav, and as we look at the opportunities, Juan and I announced that we have a plan to get $500 million to $750 million of cost out over the next three to five years. It's going to come from multiple places. Number one is driving efficiencies in our manufacturing facilities. Number two is going after costs with our third parties. And number three is controlling SG&A and some of the actions we're going to take there. Adding on to that on the other side is the simplification agenda. So as we continue to drive portfolio simplification, we see an opportunity to continue to drive margin enhancement in there too. At some of these facilities, whether you talk about consolidations or targeted divestiture, should allow us also benefit in there. We are going to do all of this while at the same time battling a lot more around the inflationary environment, whether it's the energy complex, as well as labor inflation or general inflation that continues to stay. So, focused on it, Juan said it, I've said it, it's a big self-help agenda. We know the environment that we are going into 2025. And I think the team is quite confident that we can execute this cost-out plan that we have got over the next three to five years.

Thank you so much for the update.

Thank you. Our next question comes from Salvator Tiano from Bank of America. Your line is now open. Your line is now open. Please go ahead.

Yes, thank you very much. I want to go back to nutrition specifically for Q4. So your commentary was pretty positive in that human nutrition had higher volume and pricing versus last year. But if we adjust for last year's write-down, I think you would have made 39 million human nutrition, whereas this year without the insurance, you would have made only 15 million. So it looks like the performance even with M&A was quite worse, so I cannot reconcile the two. Can you provide a little bit more color on why margins were so lower and perhaps quantify the impact of this contract cancellation in Q4?

Yes, I think when you look at it, yes, we've made progress on the growth in human nutrition, but the biggest piece that still continues to be a headwind is the specialty ingredients business. When you look at the continued inefficiencies from the downtime at Decatur East, the higher insurance premiums that we are seeing, as well as the lower pricing for texturants and demand, all put together is where we landed up for the fourth quarter. And going into 2025, we look at the same and say, when you look at Q1 and we say it's sequentially flat when you adjust for the insurance proceeds, the biggest driver there again on a year-over-year basis is the specialty ingredients. And so getting that plant back online in Q2 2025 and then doing all the self-help actions that Ian and his team are doing in nutrition will help us continue to grow nutrition's P&L in 2025.

Thank you. Just to understand though here, the fire indicator happened I think August or September last year, meaning that you should have lapsed, at least in my understanding, you should have lapsed the inefficiencies and the problems already in Q4. So that shouldn't have been an issue versus Q4 of '24 or it shouldn't be an issue in Q1 '25 versus what you posted this year?

Well, we had inventory going into Q4 of '23, and that allowed to reduce some of the impact that was there on a year-over-year basis. But also prices and the kind of tech spend that have come down, yes.

Okay, perfect. Thank you very much.

Thank you. Due to time, we'll take no further questions, so I'll hand back to Megan Britt for any further remarks.

Thank you so much for joining the call today. If you have additional questions, please feel free to reach out directly to me. Have a wonderful rest of your day.

Thank you all for joining today's call. You may now disconnect your lines.